AUDUSD Rises to 0.7670 as RBA Sits at 1.5%

Australia’s central bank left interest rates unchanged, reaffirming its willingness to tolerate slow inflation to avoid further stoking east coast property prices and household debt.

Governor Philip Lowe and his board kept the cash rate at 1.5 percent Tuesday as forecast by 27 of 28 economists — one predicted a cut. In his statement, Lowe said: “The bank’s central scenario remains for economic growth to be around 3 percent over the next couple of years. Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end. Consumption growth is expected to pick up from recent outcomes, but to remain moderate.”

The Reserve Bank of Australia has elevated financial stability in an environment of rising asset prices fueled by record-low rates. Inflation remains important, just not the immediate trigger for policy moves that it’s been in the past. The economy has also enjoyed an unexpected jump in iron ore and coal prices that has produced a windfall, though a concurrent strengthening of the currency is a hindrance for service industries.

Bloomberg

Stuart McPhee
Stuart McPhee
Australian private trader for nearly 20 years, author, trading coach, licensed adviser and regular speaker at major trading events all around the world. Graduate of RMC Duntroon and former Australian Army Officer.